Mexico and Chile have OECD’s lowest tax burden

Central and South American Tax & Money Havens, , , ,

The Organization for Economic Cooperation (OECD) and Development has published its annual report on the tax burdens in place in 2010 among its members, which shows that Mexico had the lowest tax-to-GDP ratio at 18.7%.

OECD data in the annual Revenue Statistics publication shows that the majority of OECD governments have stabilized the tax burden in place with the tax-to-GDP ratio increasingly nominally from 33.8% in 2009 to 33.9% in 2010. This however is still down from 34.6% in 2008 and below the most recent high point of 2007 when the tax-to-GDP ratio averaged 35.2%

Commenting on its report, the Organization said the underlying message from these comparisons is complex, as changes in tax revenues reflect not only changes in economic activity but also policy measures.

“In those European countries most affected by the financial crisis and subsequent recession there was an initial sharp fall in tax revenues, but then a small recovery in the tax to GDP ratio in 2010,” the OECD stated.

“The data collected also shows that in a period when all levels of government have seen pressure on expenditure and revenues, the average tax ratio for state, regional and local governments has remained steady since 2007 while that for central government has declined,” the OECD explained.

The report’s salient findings include that:

  • Out of 30 OECD countries for which provisional 2010 figures are available, tax-to-GDP ratios rose in 17 and fell in 13.
  • Compared with 2007 pre-crisis tax-to-GDP ratios, the ratio in 2010 was still down more than 3% points in six countries. In Spain it declined from 37.2% to 31.7% and in Iceland from 40.6% to 36.3%. Chile, Israel, New Zealand and the United States showed declines of 3-4% over the same period.
  • The tax burden increased from 31.4% to 34% between 2007 and 2010 in Estonia. Two other countries; Luxembourg and Turkey showed increases of 1-2 percentage points over the same period.
  • Denmark has the highest tax-to-GDP ratio among OECD countries (48.2% in 2010), followed by Sweden (45.8%).
  • Mexico (18.7% in 2010) and Chile (20.9%) have the lowest tax-to-GDP ratios among OECD countries. The United States has the third lowest ratio in the OECD region at 24.8% with Korea at 25.1% and Turkey at 26.0%.
  • The proportion of tax revenues accounted for by social security contributions rose from 25% to 27% between 2007 and 2009 whereas the share of taxes on corporate income and capital gains fell from 11% to 8% over the same period. The share of the other major tax categories were largely unchanged.

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Barbados to tap Latin American trade opportunites

Caribbean Tax & Money Havens, , , ,

Barbados Minister of Tourism, Richard Sealy has welcomed the ‘highly productive’ meetings held with officials and business leaders in Panama aimed at enhancing bilateral trade and boosting tourism receipts for both countries.

Both countries committed during the five-day trip to enhance bilateral trade and look at opportunities for exporters in Barbados to tap the Latin American market using existing infrastructure and trade arrangements, including through Panama’s Colon Free Trade Zone.

The Colón Free Trade Zone is situated at the Atlantic gateway to the Panama Canal and acts as a tax-free re-export hub. More than 2,500 companies are established there, shipping more than USD 16bn of goods annually.

Representatives of the Chambers of Commerce from the Organisation of Eastern Caribbean States have praised the initiative, stating that the Caribbean needs “to work together to realise tangible trade benefits and the mission was a good start”. They urged Caribbean territories to work together on international trade issues rather than competing with one another.

Talks were also held for the first time with Copa Airlines on establishing air links between Barbados and Panama.

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Investors look to offshore havens to beat austerity measures

Other Tax & Money Havens,

To protect pensions and legacies savers move to foreign bonds. Wealthier British investors are piling money into offshore bonds, in a bid to escape punitive new taxes on pensions, and to help with inheritance tax planning according to Emma Simon, The Telegraph.

According to L&G – one of the largest insurers in the UK – its offshore bond business grew by almost 50 per cent in the past three months. This is on top of record sales in 2010, which saw sales rise almost five times on the previous year. While Standard Life in an annual results said it had seen sales soar by a third this year.

One reason for these rises has been the recent change which has limited how much people can save into a pension each year.

But a rise in Capital Gains Tax (CGT), and a freezing of the Inheritance Tax (IHT) allowance has meant more investors are looking at ways to minimise tax charges on their investments.

People are now only able to save £50,000 a year into a pension. Danny Cox, of Hargreaves Lansdown said: “This limit is still clearly more than most people can afford to save each year. But it does mean that once high earners have maximised their pension and Isa contributions, then offshore investment bonds become an option.”So what are the advantage of going offshore? Do they allow richer investors to effectively sidestep tax?

The answer is no. Offshore bonds don’t allow you to avoid tax completely, but they can be a good way of deferring it. This can be particularly beneficial to those who are higher-rate taxpayers today, but expect to be basic-rate taxpayers when the investment is cashed in.

As well as allowing investors to choose when they pay tax, some of these bonds will also allow investors to choose whether returns are taxed as income, or capital gains. With careful tax-planning this can help them minimise overall tax bills.

In many ways offshore bonds are similar to onshore bonds. Both are basically wrappers, sold by insurers, through which consumers can invest in a range of investment funds.

They offer a wide range of externally managed investment funds – typically the same choice as people would get when investing in an Isa or unit trust. On offshore bonds there can be an even wider spread of investments, including many not widely available to UK investors.

One of the main advantages is that both offshore and onshore bonds allow customers to withdraw 5 per cent of their investment each year tax-free (although strictly speaking the tax is deferred until the bond is cashed). For retired investors and those looking to produce an income from their investment this can be an extremely attractive option.

The main difference between onshore and offshore bonds, is that with offshore, gains can roll-up tax-free – which should mean higher returns. The downside is that charges may be higher (though the charges on both on and offshore bonds are broadly similar) and that investors may not have the same protection under the Financial Services Compensation Scheme.

See more in the Telegraph here.

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Uruguay – Offshore Corporate Vehicle

Central and South American Tax & Money Havens, , , ,

The main feature of an Uruguay Offshore Corporate Vehicle:

Reputable jurisdiction

Foreign income and assets of Uruguayan corporate vehicles are not taxed. Dividends are not taxed

Flexibility

– Shares may be bearer type (anonymity)

– Bearer shares may be transferred by simple delivery

– Company only requires one director and one shareholder

– Directors and shareholders may be non Uruguayan

– Presence of directors and shareholders is not required in Uruguay

– Purpose may be all-encompassing all types of business activity

– No minimum capital required – no maximum capital limit

– Shareholder’s liability is limited to the paid in capital

– Any person or company may incorporate or acquire an Uruguayan Offshore Corporate Vehicle

Solid banking system with secrecy laws

Free inflow and outflow of capital in any currency.

Few obligations:

Prepare financials statements once a year

Hold a shareholder meeting once a year. However, it may do so by proxies.

File tax forms once a year and pay the annual tax of USD 400

The physical presence in Uruguay of any of the corporations shareholders are not necessary.

Please contact us if you want to establish a trust and or corporate structure in Uruguay.

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Hong Kong Tops Economic Freedom Index

European Tax & Money Havens, Far East Tax & Money Havens, Indian and Pacific Ocean Tax & Money Havens, , , , , , ,

Hong Kong has once again topped the Fraser Institute’s Economic Freedom Index, which measures the degree to which the policies and institutions of countries are supportive of economic freedom.

According to the report, Hong Kong scored highly across all of the five categories which are used to calculate index scores, including size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit, labor, and business.

Hong Kong has topped the Fraser Institute’s 141-country ranking every year for the past three decades. This year, Singapore, New Zealand, Switzerland, and Australia were placed after Hong Kong in the top five.

The United States experienced one of the largest drops in economic freedom, according to the report, falling to 10th place overall from sixth in 2010. Much of this decline is attributed to higher spending and borrowing on the part of the US government, and lower scores for legal structure and property rights.

“The link between economic freedom and prosperity is undeniable: the countries that score highly in terms of economic freedom also offer their people the best quality of life,” said Fred McMahon, vice-president of international policy research at the Fraser Institute, a Canadian public policy think tank.

Commenting on this year’s index results, Hong Kong Chief Executive Donald Tsang remarked that economic freedom was “part of Hong Kong’s DNA”.

“In such testing times, it is important for an externally oriented economy such as Hong Kong to remain true to our philosophy. That means strong fiscal discipline, low taxes, open markets, free flow of information, goods and capital, clean government and a level playing field for business,” Tsang said in a speech September 20.

“The fact that we have held true to these beliefs for decades is no doubt one reason why Hong Kong has consistently ranked so highly in the league tables of economic freedom. As the old saying goes: ‘If it ain’t broke, don’t fix it.'”

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